Renewcell is entering into negotiations with Sweden’s trade unions over its planned restructuring, which could result in the loss of 25 percent of its workforce, the Stockholm-based textile recycling firm announced Wednesday.
The move, which will result in layoffs of an estimated 30 employees, most of them on the production side, is part of an effort by the Circulose maker to boost efficiency, even as it maintains a focus on ramping up sales, it said. Arbetsförmedlingen, Sweden’s public employment agency, has been informed of its intent, as well. Once finalized, the anticipated overhaul will result in an annual savings of roughly 35 million kronor ($3.4 million) in terms of reduced personnel and other operating costs, Renewcell said.
“This kind of decision is never easy to make and would not be planned for unless it was absolutely necessary for our long-term success,” said Magnus Håkansson, Renewcell’s acting CEO. “The planned restructuring of the organization means that Renewcell will maintain conditions for efficient production while continuing to focus on the development of sales to fiber producers as well as focusing on marketing activities to the major clothing brands that determine the final demand in the supply chain.”
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The decision comes amid a turbulent time for the dissolving pulp maker, which ousted CEO Patrik Lundström after a profit warning in October sent shares tumbling. Renewcell’s third-quarter sales, which landed in early November, showed that it was bleeding cash to the tune of 94.5 million kronor ($9.2 million), resulting in a net debt of 905 million kronor, or $89.2 million.
Despite widespread hype about Circulose—which would go on to scoop up a top environmental prize for its ability to ease the industry’s reliance on virgin materials—Renewcell isn’t banking the offtake agreements that signal the full-throated commitments it needs. Other next-generation fiber producers have similar grouses about what they describe as an overwhelming reticence on the part of buyers, one that could stymie the growth of preferred raw materials that are needed to meet many fashion companies’ 2030 goals.
Renewcell’s woes, which were only partly ameliorated by Zara owner Inditex’s promise in late October to snap up the first 2,000 metric tons of Circulose-blended fiber from Tangshan Sanyou, led its board of directors in late November to announce that it was initiating a “strategic review to explore and evaluate various funding alternatives.” Last month saw it staunch some of its liquidity problems with a mix of new financing and adjustments on existing loans amounting to 100 million kronor ($9.7 million), including an infusion by H&M Group, its biggest stakeholder. H&M also signed a non-binding term sheet for the acquisition of 7,000 metric tons of Circulose-containing fiber in 2024 and 11,000 metric tons in 2025.
The new year saw better news when Renewcell revealed that it delivered nearly 1,000 metric tons of pre-sale stock from its Sundsvall plant to customers in December, more than the nil it dispatched the month before and the 129 metric tons that made it into the hands of customers in October. But Renewcell needs to shift 42,000 metric tons of pulp—the equivalent of between 80,000 and 120,000 metric tons of fiber, depending on the final composition—every year just to break even, Håkansson previously told Sourcing Journal. That would require some 20 brands to each call dibs on 6,000 metric tons of Circulose-incorporating fiber per annum.
Until then, Renewcell is reducing its production volume to a fraction of the 60,000 metric tons of Circulose it can pump out at full capacity each year. The calculus is cold but simple: Less production also requires fewer bodies. And while brands may balk at the premium that makes Circulose more expensive than conventional viscose, prices won’t come down without economies of scale.
It’s a Catch-22, Håkansson admitted. “We need to sell and produce in harmony,” he added.